Canada: Mandatory Data Breach Reporting Under PIPEDA: The Final Countdown To November 1

On November 1, 2018, important legislative compliance
requirements pursuant to the Personal Information Protection
and Electronic Documents Act (PIPEDA)1 and the
Breaches of Security Safeguards Regulation (Regulations) will come
into force.2 Of particular note, organizations subject
to PIPEDA will have to comply with the mandatory reporting
requirements regarding breaches of security safeguards involving
personal information that pose a "real risk of significant
harm" to individuals. The Office of the Privacy Commissioner
of Canada (OPC) has recently published guidance clarifying these
breach notification obligations.3

What is a Breach?

As a starting point, an organization subject to PIPEDA must
report to the OPC any breach of security safeguards
involving personal information under its control if it is
reasonable in the circumstances to believe that the breach creates
a real risk of significant harm to an individual. A breach of
security safeguard is defined under PIPEDA as "the loss of,
unauthorized access to or unauthorized disclosure of personal
information resulting from a breach of an organization's
security safeguards."4

"Real Risk of Significant Harm"

Applying and implementing this definition of "real risk of
significant harm" can be difficult in practice. To provide
some guidance, the OPC highlights two factors that are relevant in
assessing whether a breach creates a real risk of significant harm:
one, the sensitivity of the personal information involved in the
breach; and two, the probability that the personal information has
been, is being, or will be misused.5 The assessment of
sensitivity of the information is contextual and the circumstances
of the breach will inform the extent to which the information is
sensitive. Although certain information may be obviously sensitive,
other information may not be. Organizations should consider the
potential harms that could accrue to an individual. The assessment
of the probability of misuse requires an organization to inquire
into several aspects of the breach. For example, factors such as
who actually accessed or could have accessed the personal
information, the length of time the information has been exposed,
and the presence of any evidence of malicious intent are all to be
taken into account.

The province of Alberta has had breach notification using the
"real risk of significant harm" test as part of its
Personal Information Protection Act since
2010.6 Therefore, it is helpful to canvass existing
interpretive guidance that the Alberta's Office of the
Information and Privacy Commissioner (AOIPC) has provided as well
as the applicable cases on the definition of "real risk of
significant harm" under the Alberta statute. Based on the
Alberta experience, to meet the "significant" harm test
the harm must be important, meaningful, and have non-trivial
consequences or effects.7 A common theme across many of
the Alberta cases is that identity theft, fraud, and financial loss
militate in favour of a finding of significant
harm.8

In terms of meeting the threshold of "real risk", the
likelihood that the significant harm will result must be more than
mere speculation or conjecture.9 A broad exposure of the
compromised information (e.g. on the dark web with unknown
source)10 can increase the probability of risk. As well,
in Feld Entertainment, Inc.11, it is explicitly
stated that the lack of reported misuse over a period of as long as
three months does not mean such activities will not occur in the
future. Importantly, other forms of harm beyond the most directly
causal consequence will be considered in assessing risk. For
example, speculation on the part of an organization that the breach
would not cause credit card fraud does not necessarily mitigate the
potential harm from identity theft or other forms of fraud as it
was determined that many individuals use the same credentials
across various accounts.12

As another example, in McAfee Ireland
Ltd.13, the AOIPC decided that there was a real
risk of significant harm from an incident where customers of the
organization's India-based support service vendor received
fraudulent phone calls from callers misrepresenting themselves as
the support vendor. In McAfee, the presence of malicious
intent (social engineering for financial gain) was deemed a real
risk, and the combination of compromised contact information and
subscriber information could be used for unsolicited targeted
telephone calls and phishing attacks, constituting significant
harm.14

It is important to note that under PIPEDA, notification to
individuals must be given as soon as feasible after an organization
has determined a breach involving a real risk of significant harm
has occurred. The policy rationale behind this requirement is that
by providing notification to the individual, it allows the
individual to understand the significance of the breach and to take
steps to reduce the risk of or mitigate the harm.15

Contract Negotiation with Service Providers

As the PIPEDA breach notification requirement applies to all
organizations with control of personal information involved in a
breach, each organization must consider its own obligations under
PIPEDA. The OPC expects that each organization will submit its own
report to the OPC in the event that the breach notification
obligation is triggered. Companies engaging in contractor and
subcontractor work should provide a process for dealing with these
respective obligations upfront in their contractual arrangements to
avoid any confusion.16

Record Keeping

Organizations must keep a record of every data breach for at
least two years, however, the OPC actually recommends that the
records be kept for five years.17 Also of note is that
although there is no enumerated definition of a "record"
in the Regulations, the definition of a "record" is
construed broadly by the OPC.18 The Access to
Information Act19 (AIA) has been amended to provide
an exception from disclosure for data breach reports, so this broad
interpretation of a "record" would shelter a wider array
of information from disclosure under the AIA.

Conclusion

As of November 1, 2018, organizations are required to report to
the OPC and the affected individuals any breach of security
safeguards involving personal information under its control if it
is reasonable in the circumstances to believe that the breach
creates a real risk of significant harm to the individuals. A
common theme that militates in favour of a finding of "real
risk" from Alberta's experience with a similar requirement
is evidence of malicious intent (e.g. financial gain, vehicle
break-in, theft, or impersonation of a person in authority, etc.).
In drafting and negotiating contracts with service providers who
handle personal information, organizations need to address the
parties' respective breach notification obligations as well as
the record-keeping obligations. As these changes to PIPEDA and the
Regulations will shortly come into force, organizations handling
personal information must quickly adapt to the new landscape of
privacy protection.

The author of this article gratefully acknowledges the
contributions of articling student Tiffany Chiu in the preparation
of this article.

The breach notification obligations for Canadian organizations will change significantly in 2018: (i) the EU's GDPR came into force on May 25, 2018; while (ii) new reporting obligations under Canada's PIPEDA...

Like many organizations in Canada, yours is probably not fully prepared for the mandatory breach reporting requirements coming into force under the federal Personal Information Protection and Electronic Documents Act (PIPEDA) November 1, 2018.

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